Question 1
The following is an example of an error that will not be discovered on the trial balance:
A. An entry was journalized and posted as a debit to cash for $500 and credit to accounts receivable for $5,000.
B. An entry was journalized and posted as a debit to cash for $500 and a credit to sales revenue $500 when payment was received on a customer's account.
C. An entry was journalized and posted as a debit to wages expense for $20,000 and a debit to wages payable for $20,000.
D. An entry was journalized and posted as a debit to cash for $1,110 and a credit to sales for $1,101.
Question 2
On April 1, 2007, the premium on a one-year insurance policy on equipment was paid amounting to $3,000 with the insurance starting on that date. At the end of December 31, 2007 (end of the accounting period), the financial statements for 2007, would report:
A. Insurance expense, $3,000; Prepaid insurance $0.
B. Insurance expense, $0; Prepaid insurance $3,000.
C. Insurance expense, $750; Prepaid insurance $2,250.
D. Insurance expense, $2,250; Prepaid insurance $750.
Question 3
On July 1, 2009, Allen Company signed a $100,000, one-year, 6 percent note payable. At due date, June 30, 2010, the principal and interest will be paid. Interest expense should be reported on the income statement for the year ended December 31, 2009 as:
A. $6,000
B. $3,000
C. $1,500
D. $0
Question 4
On January 1, 2007, the ledger of Global Corporation correctly showed supplies inventory of $1,000. During 2007, supplies purchases amounted to $5,000. A physical count of inventory on hand at December 31, 2007, showed $1,200. The 2007 income statement should report supplies expense amounting to:
A. $6,000
B. $5,200
C. $4,800
D. $1,000
Question 5
At the end of its accounting period, December 31, 2009, August Corporation owed $1,000 for property taxes for the current year, which had not been recorded or paid. Therefore, the 2009, adjusting entry should be:
A. $1,000 credited to an expense account and debited to a liability account
B. $1,000 debited to an expense account and credited to an asset account
C. $1,000 credited to a liability account and debited to an expense account
D. $1,000 debited to a liability account and credited to an asset account
Question 6
Which of the following would most likely lead to a deferred adjustment?
A. Wages payable
B. Income taxes payable
C. Unearned revenue
D. Interest expense
Question 7
Which of the following errors would most likely lead to an overstatement of income?
A. Recording revenue next period when the cash is collected although it is earned in the current year.
B. Recording an expense incurred this year when the cash is paid next year.
C. Failure to adjust deferred rent revenue account for the portion of rent earned this year.
D. Failure to record an expense incurred in the current period.
Question 8
Of the following accounts, which one would not appear in the post-closing trial balance?
A. Service revenue
B. Supplies inventory
C. Contributed capital
D. Retained earnings
Question 9
Modern Mother Magazine has received cash subscriptions on April 1, 2009 in the amount of $3,600,000 for the next three years. Their year-end is December 31, 2009. Magazine delivery occurs monthly and started on April 1, 2009. These were the only subscription sales for the year. Answer the following questions for the year ended December 31, 2009:
a. What amount of cash should be reported for the year on the statement of cash flows?
b. What amount of subscriptions revenue should be reported on the income statement?
c. What amount would be reported as unearned subscriptions revenue on the balance sheet as of December 31, 2009?
Question 10
The adjusted trial balance of Tahoe Company at the end of the accounting year, December 31, 2011, showed the following:
A. Give all the required closing entries for Ward Company at December 31, 2011.
B. Calculate the 2011 ending balance in retained earnings.
11 - Operating Activities of a Business
Retained earnings will show much of the profit has been left in the company. Some companies retain all profitwhereas others pay out a portion in the form of dividends. Find a publicly-traded company that does not pay dividends and discuss why management of that company has decided not to pay out profits to shareholders.
Would you as a shareholder prefer to receive dividends or have the business reinvest the money? Why?